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A Maine judge's ruling in a case involving a business that sued its bank after losing $345,000 in a cyber heist could set a precedent about how diligent companies must be in protecting their assets online.

About $243,000 worth of transfers were successfully blocked by the bank after the fraud was discovered. However, Patco was left on the hook for the remaining $345,000 -- plus interest charges on more than $100,000 the bank used from Patco's credit line to cover the illegal transfers.

In its lawsuit, Patco charged Ocean Bank with negligence and breach of contract for failing to spot and stop the unauthorized ACH transfers.

The bank put the blame for the loss on Patco. The bank noted that it was only because Patco allowed its online banking credentials to be compromised that thieves were able to log in and steal money in the first place. Ocean Bank insisted that it processed the ACH requests in good faith after it verified that the proper IDs, passwords and answers to challenge response questions.

Patco claimed that the bank should have spotted the illegal transfers because they were out of character with previous transactions it had made. Patco also blamed Ocean Bank for not implementing stronger authentication mechanisms such as token-based authentication and out-of-band verification, which a large number of banks were using at the time.

According to Patco co-owner Mark Patterson, the unauthorized transfers to out-of-state bank accounts did trigger warnings inside Ocean Bank, just no action. "Alarms were going off all over the place, but the unfortunate part is that the bank was not watching them," he said in an interview Tuesday. "It's not their problem. They're not responsible for security."

The hackers apparently installed the Zeus password stealing malware on a Patco computer and then used that information to log into the online Ocean Bank account, Patterson said. "Somehow somebody opened up the wrong spam email or whatever, and Zeus malware was put on our computer."

After waiting for the account to fill up, the thieves quickly began moving cash out of Patco's account to money mules all over the U.S. By the time Patco realized what had happened, the thieves had been moving about $100,000 per day for several days.

Patco said that the manner in which Ocean Bank configured its authentication system only gave the appearance of being multi-factor, even though it wasn't.

In a 70-page ruling last week, Magistrate Judge John Rich sided with Ocean Bank and recommended that the U.S. District Court in Maine grant the bank's motions for a summary dismissal of Patco's complaints.

Rich dismissed Patco's complaints about bank's handling of the ACH transfers and agreed that the theft resulted largely from Patco's failure to protect its banking credentials. The judge said Ocean Bank had provided clear notice to Patco about its online authentication measures and security controls as well as the extent to which it could be held liable for any mishaps.

The judge did concede that Ocean Bank could have done more to authenticate the identity of those initiating money transfer requests. But he held that what the bank did was reasonable and comparable to the controls many other banks had in place.

The ruling is important because numerous small and medium-sized businesses (SMBs) have been plundered in the same way as Patco in recent years. Most cases involved cyber crooks finding a way to steal online banking credentials, particularly from smaller companies, and then using those credentials to initiate large ACH transfers.

Such thefts have resulted in hundreds of millions of dollars being stolen from SMB accounts over the last three years and then transferred outside the U.S.

Just last month, the FBI and the Financial Services Information Sharing and Analysis Center (FS-ISAC) warned about a growing number of incidents in which accounts belonging to SMBs were being looted and the money sent to apparently legitimate businesses in China.

The U.S. Federal Deposit Insurance Corporation protects consumers from this type of fraud, but banks consider small businesses liable, a position now backed up by the Maine court ruling. Patco has asked the judge to review the ruling, but if he allows it to stand, the company's only option is to appeal. Patterson isn't sure what the company will do.

"We're thinking about it," he said.

Patco has stopped doing almost all ACH transactions online now and has moved back to paper checks, Patterson said. "It's painful. It takes more time for our employees. They have to go down and make a deposit and we have to write all the checks," he said. He'd still like to use online banking, but won't because of the problems with ACH. "The problem is it's not secure and the banks are not responsible if an ACH fraud happens," he said.